Dubai’s Nakheel seeks suspension for $5 billion in bonds
Dubai’s Nakheel asked for three of its listed Islamic bonds worth $5.25 billion to be suspended pending details of restructuring plans at its parent company, a move likely aimed at dampening speculation on the bonds.
The request briefly stalled but did not stop trading in the bonds, which are exchanged over the counter and not on the bourse, where the listing is regarded as a technicality.
The request also added to confusion that has reigned in the markets since the Dubai government last week said it would seek debt standstill agreements from creditors to Nakheel and Dubai World, briefly sparking fears of a renewed crisis.
“After the suspension announcement, it took some time on compliance to establish if they could trade, but as of 11:30 they started trading,” Mohieddine Kronfol at Dubai-based fund manager Algebra Capital said.
The three instruments listed on the exchange are a $3.5 billion sukuk due on December 14, a 3.6 billion dirham sukuk ($980.1 million) due on May 13 and a $750 million sukuk due on January 16, 2011.
Nakheel’s December bond was trading at 58 on Monday, according to Thomson Reuters data, having traded as high as 110 on Wednesday before the Dubai government’s announcement. Its 2011 debt was trading at 55.
“They are trying to minimize the huge amount of speculation going on until a definitive statement comes out,” said a Dubai-based fixed income banker.
Nakheel, developer of a series of created islands in the shape of palm trees off Dubai’s coast, said it had asked Nasdaq Dubai to suspend all three of its listed Islamic bonds, or sukuk, “until it is in a position to fully inform the market.”
Nakheel officials were not immediately available to give further details on the suspension.
Nakheel’s first bond, the $3.5 billion sukuk, was widely expected by the market to be repaid on time.
United Arab Emirate stocks tumbled 6 to 7 percent on Monday as the market reopened for the first time since Dubai called for the delay in debt repayments.
The UAE on Sunday offered the country’s banks emergency support and Abu Dhabi said it would provide selective support to Dubai companies.
($1=3.673 Uae Dirham)
(Reporting by John Irish and Jason Benham; editing by Kim Coghill, Thomas Atkins and Karen Foster)